Indian bonds are rising after the Reserve Bank’s $32 billion liquidity boost

Indian government bonds rose in early trade on Wednesday after the central bank announced a major liquidity injection for the coming month, easing concerns about near-term debt supply. The benchmark 10-year yield stood at 6.5679% at 9:50 AM IST, after closing at 6.6328% on Tuesday. Bond yields move in the opposite direction to prices. The Reserve Bank of India said it will inject about 2.90 trillion rupees ($32.42 billion) into the banking system through open market bond purchases and a dollar-rupee swap. The RBI will buy government bonds worth Rs 2 trillion in four tranches between December 29 and January 22 and execute a three-year $10 billion buy/sell swap on January 13.

“This is what the market needed, a bond buying calendar that gives more clarity on where things are going and also helps improve auction demand,” said a trader at a state-owned bank.
The 10-year yield was down about 7 basis points from Tuesday’s session high on speculation that the RBI would buy bonds in the secondary market.

Data for the ‘others’ category, which includes RBI activities, showed net purchases of Rs 47.4 billion, reinforcing this view.

The central bank has already bought 1 trillion rupees worth of bonds and carried out a 5 billion dollar foreign exchange swap this month.

For 2025, the RBI has bought bonds worth Rs 6.5 trillion, which is already a record high. Markets have been wary of rising borrowing costs, with analysts estimating total debt supply between January and March at around 8.1 trillion rupees.

PRICES

Indian overnight index swap yields rose, but trading volumes remain shallow.The one-year OIS rate and the two-year OIS rate had not yet been traded. The five-year OIS yield was lower at 5.93%, after hitting a more than nine-month high of 6.0150% on Tuesday.

($1 = 89.4440 Indian Rupees).